Sport is no longer just about what happens on the pitch or court and the connection with local fans. Clubs, or perhaps more instructively “franchises”, have become big businesses. The major teams are owned by hugely wealthy individuals or groups of investors, and they’re increasingly interested in going public.
Their shares being traded on stock exchanges allows them to access more capital from a broad range of investors. But how do sports franchises get listed on stock exchanges, and what does this mean for sports as a whole?
The basics
As you’re likely aware, when a company goes public, it transitions from being privately owned to being partially owned by outside investors. This provides access to more capital, which can be used for expansion, improving stadiums, or transferring in higher quality players.
For a sports franchise, like any other business, listing on the stock exchange is a strategic decision – it allows for more financial flexibility and often the chance to tap into a huge fanbase for investment. It isn’t always a straightforward process, as sports teams often must meet strict regulatory requirements.
The process
The process of listing on a stock exchange generally follows these steps:
Preparation: The team prepares its financial statements for transparency and accuracy. This is an important step to comply with the exchange’s regulations.
Choosing an exchange: The next step is selecting a stock exchange, with most sports franchises choosing major exchanges like the New York Stock Exchange (NYSE), NASDAQ, or London Stock Exchange (LSE); these offer the most liquidity.
Initial Public Offering (IPO): The franchise will then offer shares through an IPO. It decides how many shares to issue, price per share, and the timing of the offer. Investment banks often help with this, determining price range and securing buyers.
Market debut: Once pricing is determined, the franchise officially goes public, and its stock begins trading. Investors buy and sell shares of the team just as they would any other publicly traded company.
Post-IPO: Once public, the franchise needs to meet ongoing reporting and regulatory requirements: quarterly earnings reports, shareholder meetings, and maintaining transparency in its financial dealings.
Ownership structures
One of the challenges for sports clubs going public is the issue of ownership. Many franchises, especially NFL sides and the IPL teams featured on https://www.my10cric.com/cricket/indian-premier-league/ have multiple owners, and some may be more reluctant to dilute their control. This is why some teams that go public may offer only a portion of their total shares, keeping majority ownership within the hands of the current owners.
In some cases, franchises choose a dual class share structure; this allows certain shares to carry more voting power. The founding owners maintain control over the biggest decisions. This structure is common in the tech world but has been used by some sports teams.
What impact does going public actually have?
Going public brings benefits and challenges. The big advantage is capital. A franchise that goes public can use the funds raised from selling shares to pay off debt, invest in facilities, improve its team and staff, or expand its global fanbase. The additional capital might allow for higher player wages and more marketing.
There are downsides for sports teams to consider. Once they’re publicly traded, they become subject to the whims of the stock market. Their financial health is tied to external factors (marketing conditions, investor sentiment), which might not align with the team’s on-field results.
Another challenge is the pressure for short-term profits. Sports teams sometimes focus on long-term goals (some more than others, of course) like player development and brand building. But stock market investors often want immediate returns. This pressure may affect decision making at the top, from the selection of players to the franchise’s overall strategy.
Football and the rise of clubs on stock exchanges
Football, particularly in Europe, is one of the sports more interested in stock exchanges. Clubs like Manchester United, Juventus, and Borussia Dortmund have gone public at one time or another. The stock market is viewed as a vehicle for growth and international expansion.
Manchester United were perhaps the most famous example. When the Glazer family listed shares on the NYSE, fans widely derided the decision, but some argued the IPO brought increased visibility to the club. Juventus went public on the Borsa Italiana, allowing fans and investors to buy shares.
What about basketball?
Companies involved in the National Basketball Association (NBA) in the US are often looking to expand. While not teams themselves, Madison Square Garden Sports (MSGS), owners of the New York Knicks, are listed on the NYSE. The NBA league itself is a privately owned company and not listed on a stock exchange.
Various partners, such as Nike, Under Armour, PepsiCo (which owns Gatorade), and Microsoft (a major sponsor of the NBA), are available on the NYSE and NASDAQ. Just behind football, basketball is the most popular sport worldwide, so teams would likely attract huge investment if they were publicly listed in the future.
Last word
Sports franchises are increasingly considering stock exchanges to fund their expensive operations. Listing on a stock exchange offers franchises a way to unlock more capital and potentially achieve better results. But the path won’t always be straightforward – there’s a chance for more capital, but that brings more pressure for success and the influence of external forces. Listings may continue to rise as short-termism means more fans (in various sports) are demanding quick success.
In the Premier League, clubs have faced enormous losses in recent years, with teams like Chelsea, Aston Villa and Leicester particularly struggling. The average weekly wages in some teams (Manchester City, Manchester United, Chelsea, Liverpool) is nearing £200,000 – that’s for one single player. Both the Premier League and IPL have financial rules (PSR and salary caps) that teams are instructed to follow, but this doesn’t always result in steady profits.
Owners may be tempted to raise more funds so that they can afford the biggest stars. Ultimately, the ability to go public can influence which franchises the best players play for, and what teams enjoy the most success.
